Wednesday, June 23, 2010

REAL ESTATE - More Student Housing?

We have just witnessed the approval of another student housing project. This one is no where near JMU and is on land formerly zoned for industrial use. The developer got a variance to allow more units per building and construction will start soon. Most folks don't get it. Why does it seem that these projects are popping up faster than roadside taco stands?

The truth is that student housing apartments have passed taco stands for many years, in spite of the fact that JMU has had negative demand for off campus housing since 2005. So why do we need another huge student apartment project?We don't, but lets look at what the major players have to gain to explain this phenomenon. First of all, most of our city officials (not Carolyn) have approved rezoning, variances and development plans on the short sighted belief that the increased tax base is a good thing. The second big player is the developer, who doesn't care about our staggering surplus because they have another plan. The third force at work in this equation are the students, who tend to want those apartments that are the biggest, best and newest. They always seem to gravitate to the hot new development, no matter where it is and no matter what it costs.

So here is how the scenario works. The city re-zones land and approves the new development. The developer leases 95% of the project to students. After a few years of high occupancy and good rental income, the entire project is sold to some isolated investment group. The new owners have no idea of the thousands of surplus units because their purchase is based on the brief financial performance of the project. Developer number one takes the money and runs while the new owner has but a few years before the project starts its downward spiral.

So why should we, as innocent bystanders, care about the student housing merry go round? Because we are the big losers in the long run. Most of the formerly popular student units eventually become some form of low income housing. That bedroom at Hunters Ridge, which once cost $400 per month, can probably be rented for $150. The condo at University Place once rented to 3 students for $900 a month now houses an extended family of 8, who pay $400. These old student rentals have become a magnet, drawing in low income residents from 40 miles away and further straining our school system, social services, health care and public safety. This burden far exceeds any property tax benefit and the rest of us are paying the bill.

So, when the new student housing paradise opens in 2011, be proud, because your taxes ultimately pick up the tab for this housing surplus. Maybe they will let us use the tanning beds or the hot tub . . . . .